Supreme Court Decision Likely to Change Clean Water Act Enforcement

On March 21, 2012, the United States Supreme Court unanimously ruled that a US Environmental Protection Agency administrative order issued under the Clean Water Act is a final agency action for which there is no adequate remedy other than judicial review, and therefore such orders are subject to judicial review under the Administrative Procedures Act (APA) even if the EPA has not yet sought to enforce such an order. Sackett v. Environmental Protection Agency, 566 U.S. ___ (2012), No. 10-1062 (March 21, 2012). In so ruling, the Supreme Court reversed the Ninth Circuit Court of Appeals’ holding in the underlying action that the Clean Water Act precluded pre-enforcement judicial review of EPA Clean Water Act administrative orders, and that such preclusion did not violate a party’s right to due process. Justices Ginsburg and Alito each authored a concurring opinion.

The case involved property owners who filled in a portion of a lot in Idaho where they intended to build a home. A few months after completing the fill work, the owners received an administrative compliance order from EPA that included findings that the property contained wetlands for which a fill permit was required, and that by failing to obtain such a permit the owners violated the Clean Water Act. The order also directed the owners to restore the property to its pre-fill condition pursuant to an EPA created Work Plan. The owners disagreed with the conclusion that their property contained wetlands subject to the Clean Water Act. They asked EPA for a hearing, which was denied. They then brought a suit in the United States District Court for the District of Idaho seeking declaratory and injunctive relief under the APA and the 5th Amendment (alleging lack of due process). The District Court dismissed the suit for lack of jurisdiction. The owners appealed to the Ninth Circuit which, as noted above, affirmed the dismissal.

The opinion focused on the threat of $75,000 per day penalties for failure to comply with the order and the lack of ability for an order recipient to force a hearing with EPA in finding that the order constituted a final agency action. The final action conclusion coupled with the absence of an express or implied preclusion of pre-enforcement judicial review in the Clean Water Act was sufficient for the Court to reach its ultimate decision.

In her concurring opinion, Justice Ginsburg wrote that while the Court held the owners could immediately litigate their jurisdictional challenge to the order (as to whether or not their property contained wetlands), the question of whether the owners could challenge the terms and conditions of the order is a “question [that] remains open for another day and case.” Although that may be the result in this case, it appears that the reasoning in Court’s opinion would be easily extended to allow pre-enforcement judicial review of the terms and conditions of an administrative order as final agency action as well. At a minimum this decision is likely to change how EPA attempts to enforce alleged Clean Water Act violations and gives order recipients an opportunity to litigate at least the jurisdictional validity of an order before being forced to choose between compliance with the order or face the possibility of $75,000 per day penalties for failing to comply.

Martin J. (“Kelly”) McTigue is a partner in O’Melveny & Myers‘s Los Angeles office and a member of the Transactions Department, as well as the Project Development and Real Estate Practice. Kelly’s practice covers a wide range of environmental issues, including water quality and supply, air quality including climate change and greenhouse gas regulation, reporting obligations, permitting issues, and the regulation and remediation of hazardous substances.